EFRAG agrees that existing IFRS lacks guidance on the accounting for distributions of non-cash assets to owners, but has several significant concerns regarding the proposals.
D23 addresses how an entity should measure an obligation to distribute non-cash assets to its owners in their capacity as owners (i.e. a liability for a dividend payable). It also addresses, when an entity settles such a liability how should it account for the difference, if any, between the carrying amount distributed and the amount recorded for the dividend payable.
EFRAG is concerned about the accounting mismatch the approach proposed will create, and also that it has been assumed in D23 that the decision to distribute the non-cash asset results in a liability.
EFRAG also disagrees that IAS 37’s best estimate measurement attribute is necessarily the same as fair value in other circumstances.
Finally, EFRAG is divided on where the difference between the carrying amount of the asset and the amount of the liability for the dividend payable should be recognised when the liability is settled.
Deadline for comments is 9 May 2008.
Letter
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